Let’s face it. Most people don’t have a good word to spare about advertising. Most advertising is bad. It’s intrusive. And the amount of human productivity lost by spending time watching ads on TV or YouTube makes me sad. As someone who has spent the last half a decade working with advertising in one form or another, you might be surprised to hear that I don’t love it. Heck, the web browsers on my laptop and phone both have ad-blockers switched on.
But despite all the hate, advertising serves a deep and meaningful cause. But before we get into that, let’s agree on the bad parts of advertising:
Why do we hate advertising?
Hating on advertising (unlike other issues) is probably something that the whole of humanity can agree on. And I think there are three major reasons:
- The sheer amount of digital data that advertising has on us individuals.
- Advertising encourages us to spend money we don’t have on stuff we don’t need.
- It’s annoying and ruins experiences on our favourite sites and services.
I agree with them all. In an ideal world, we wouldn’t need any advertising and everything would be wonderful. In an ideal world, businesses would all be remarkable and each would have a traffic magnet that magically attracts the right set of prospective customers. However, only a minority of companies can truly become remarkable. To be exceptional is to stand out from the crowd. So by definition, the whole crowd cannot be exceptional. What are the average or mediocre business amongst us left to do to attract business?
Small and medium-sized businesses are the crowd.
In this competitive day and age, the largest companies in the world also attract most of the customers by the sheer power of their brand, offering and because of the closure of high streets due to Covid. Large companies grow and the small and medium-sized enterprises (SMEs) record losses and are falling behind. This Harvard Business Review article makes for a sobering read of the US business environment. It’s unlikely to be different across most of the western world.
Why am I telling you this?
Because, you guessed it, the unlikely saviour of the small and medium-sized business: Advertising.
And there are two companies in particular that will help SMEs succeed: Facebook and Google. The ad duopoly.
But before we get into that, let’s explore how advertising actually helps ‘the little guy’.
How advertising levels the playing field
In pre-internet days, businesses would often have to shell out a lot of money to advertise. Unless you were advertising in classifieds, you had to shell out at least couple of thousand for full page adverts in local or regional newspapers. Even print flyers are expensive to print and distribute. In that world, scale was a big advantage. The more you print, the cheaper the unit cost is. But it also means you’ve likely got a bigger budget and can test lots of different ad variations and channels.
The internet changed this. Suddenly, you could reach many thousands with a simple text ad that could be reproduced at virtually no cost.
Modern direct response advertising means for $10 you can easily reach a thousand people and possibly even attract a few customers amongst those. A dollar spent on Facebook by Gap is worth exactly the same as a dollar spent by a Mom and Pop jeans store. The self-serve model from Facebook and Google means that you can spend just $200 instead of $20,000 to advertise products. It opened up a whole new world of advertising possibilities for small businesses.
When you’re a small player and operate online, advertising is often the only way to reach your customers. Sure, you can build a traffic magnet, but you need resources and time to build that. A luxury that many small businesses cannot afford.
Organic search engine traffic again takes time and resources to write the content, build links and start ranking. So you need deep time and money pockets to invest in that. Many businesses don’t have that and need to get customers before the next payroll is due.
Why Facebook and Google are best placed to help online SMEs compete
Facebook and Google’s core products are geared at helping SMEs. Although numbers from Google are hard to find, 75% of Facebook’s revenues come from small business ads. Google’s revenue is likely to be skewed towards SMEs in a similar manner. Unlike other Big Tech companies, they have little to no conflict of interest in helping SMEs succeed.
Compare that to Apple who don’t care about or need small businesses. The company is not a small business platform since the App Store, the main way SMEs might interact with Apple, is prohibitively expensive to enter. It often costs north of $50,000 to build an app. That’s not even counting the cost to market it and drive traffic to it. Tom Lambert, a friend of the Startup Marketer, recently wrote an article about how Apple excluded an app from the App Store because it launched its own version with similar functionality. After suing them, the app was eventually allowed back onto the store, but it is still hampered by restrictions Apple imposed on them. Not exactly an SME’s best friend.
In a similar vein, Amazon has been accused of pushing its own products over its 3rd party merchants (many of whom are SMEs). Despite it earning a vast amount from helping businesses sell their products on the Amazon marketplace, many merchants are turning away or being turned away by the company. Not exactly an SME hero either.
Shopify is another Big Tech company that is worth north of $130 billion and is an SME champion. But it mainly serves as a software provider for online stores rather than helping its customers sell more of their product. So we’re going to leave this company out of discussions.
A dancing couple who hate each other
Despite Facebook and Google often being seen to compete with each other, there is probably less competition between them than most people assume:
Generally speaking, Google Ads help you mop up existing demand (e.g. people actively searching for “red sneakers”). Facebook Ads on the other hand tap into the company’s audiences to help showcase products (e.g. red sneakers) and create demand for them. Facebook Ads help inspire the audience to purchase them creating new demand.
In other words, Google helps SMEs capture demand that may have otherwise gone to large brands who can afford to be front of mind. And Facebook helps generate new demand that SMEs may not have otherwise capitalised on. The two ad platforms serve two different purposes. But together, they have helped build many new businesses and startups that would likely have not been started otherwise.
What happens to SMEs’ fortunes if Google and Facebook are broken up?
Although part of me wants to see what a world would look like where Instagram competes with Facebook for consumer attention. I don’t think splitting Facebook and Google into smaller parts would be beneficial for SMEs. It would lead to a fragmentation of different places to advertise your business. Additionally, it would also mean the data would not be unified between the fragments. Less comprehensive data makes advertising on the platform less effective and more wasteful to the advertiser.
Furthermore, most small advertisers wouldn’t be able to service each individual channel. They would have to pick and choose where to advertise and as a result get a smaller reach than they would have otherwise. Fragmentation is something that large companies would likely be able to deal with, giving them a competitive advantage again over SMEs.
I’m not arguing that Facebook and Google are doing things perfectly and therefore should remain as they are. There is a lot to complain about and they are both rightly facing inquiries into their business practises. But when regulators or politicians argue for a breakup, SMEs are likely to be the ones to suffer from this.
Advertising is good for the world?
If you previously thought negatively about advertising, hopefully, I’ve given you a different perspective to consider. Yes, it’s intrusive and annoying as hell. No, I’ll still keep my ad blocker on, thank you very much.
But advertising done right does help keep the lights on for many smaller businesses since there’s nothing else like Google or Facebook that gives them the scale to reach their customers. Next time you get interrupted by ads, spare a thought to the small businesses who depend on them.
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